Pre-Opening Wheat Market Report

July wheat was trading 5 cents higher near 7:30 am cst. Outside market forces look very supportive today with a break in the US dollar and a surge higher in equity and metal markets. The market saw a recovery bounce yesterday and the turn up in outside markets could provide solid support today. The steep drop in crop conditions for the winter wheat crop of the past three weeks has traders looking for a decline in the winter wheat production forecast for next week's USDA Crop Production and Supply/demand reports. Traders seem to be expecting a 25-50 million bushel drop. The USDA attache in Russia sees grain production for 2012 at 88 million tonnes which includes a forecast for 54 million tonnes of wheat. Last month, the USDA pegged Russia wheat production at 56 million tonnes and some traders see the crop down below 49 million. The attache sees Russia exports at 19 million tonnes from 27 million this past season. As a result, many traders see a smaller world production estimate as well. July wheat closed 14 1/2 cents lower on the session yesterday as a strong US dollar, good growing weather for the new crop and an active harvest for winter wheat helped to pressure. While other outside market forces like equity markets and gold shifted to a more positive tilt, the higher US dollar helped to discourage new buying due to the possible impact on exports. Fund traders seem to be building another net short position in wheat and traders see increased harvest selling pressures just ahead as the harvest picks up steam. The winter wheat harvest is already 20% complete and traders see the spring wheat crop in good condition. Taiwan seeks 48,750 tonnes of US wheat. Traders remain concerned with Black Sea crop conditions with a warmer and drier forecast ahead but with good crops in the US and Europe, there is a little less pressure for the Black Sea region to achieve normal yield. India monsoon activity will be monitored closely in the next few weeks.